The Wigmore Association 2024 Capital Market Outlook

The Wigmore Association is a group of five family offices from around the globe. They serve similar clients – generally families of wealth – and all are committed to helping those families achieve their financial and life goals.

Wigmore members are a diverse group with their own individual investment methods and philosophies who come together to talk about strategies, share information and exchange ideas with a goal of serving their clients better.

As 2024 begins, leaders from the Wigmore Association offer their perception of the current market environment and their outlook for the coming year.


HQ Trust: 2024 Capital Market Outlook

The year 2023 was quite positive for most investors. Global equity markets saw strong gains of 18.6% (MSCI ACWI in euros) and bond markets also rose by 4.9% (Barclays Multiverse EUR-hedged). In view of the ongoing geopolitical tensions, the price of gold
also recorded a significant increase of 9.6%. Conservative hedge funds returned around 0%, while activist hedge funds significantly outperformed the global equity markets.

The picture was also favourable for illiquid asset classes such as private equity, private debt and infrastructure despite the challenging environment.

Our clients‘ portfolios were able to participate adequately in the market trend. For example, our liquid portfolio with a 60% share of equities gained around 12%. Its counterpart including illiquid asset classes achieved growth of 6%.


Mutual Trust: Beyond traditional - Pulling back the curtain on Private Credit

When you pull back the curtain on Private Credit, it reveals new opportunities beyond those offered by traditional asset classes. Private Credit provides investors with another avenue to support growth and innovation across industries and economies. These investments typically provide recurring income, while reducing portfolio volatility through economic cycles. Our preference is to combine more defensive, senior secured lending exposures with select growth opportunities, including mezzanine or opportunistic debt as well as distressed debt.

Click below to view the article from Mutual Trust on Private Credit in full.


Turim's Economic Report: December 2023

The Economic Report for this month highlights the strong process of global disinflation, the conservative stance of the COPOM, and the closure of global interest rates in the last months of 2023.

In 2023, we witnessed a faster global disinflation than the market expected, driven by the reorganization of production chains and the moderation of commodity prices. In this context, the central banks of major economies were able to choose to combat inflation in an “opportunistic” manner, enabling an interruption of the interest rate hike cycle in 2023. In the case of the United States, there is speculation that the interest rate cut cycle may begin as early as the first quarter of 2024.

Despite the improvement in the economic situation, the Monetary Policy Committee of the Central Bank of Brazil (COPOM) adopted a conservative stance, maintaining the indication that it foresees the maintenance of the current pace of interest rate cuts in the upcoming meetings. At the same time, the country’s net exports reached a record balance of almost 100 billion dollars, reflecting growth in the volume of exports, despite the decline in prices of commodities important for the export agenda.

December was also marked by the closure of interest rates in the U.S., impacting not only short-term maturity bonds but also longer-term ones. This movement helped explain the strong performance of stock indices in the month. On the other hand, the majority of the return of the main indices for the year was concentrated in a few names. For example, the S&P 500 had about 75% of its return explained by the “Magnificent 7” – a name attributed to a hypothetical basket of seven of the largest technology companies in the index.


HQ Trust: "Family days strengthen cohesion"

“Family days strengthen cohesion”

The first time they meet, some people still have reservations, but then they happen again and again. In an interview, customer advisor Kerstin Rasch explains the background and significance of family days. She talks about possible topics, how to deal with conflicts – and the need for organizational framework conditions.

You organize family days together with your clients time and again, Ms. Rasch. What are these meetings about?
Family days are primarily about strengthening cohesion within the family. Often, subsequent generations are to be more involved or introduced to tasks. In some cases, however, the families also talk about fundamental issues. For example, about family assets or how the family would like to position itself in the future, make decisions or resolve conflicts. We help organize and moderate these days, which couldn’t be more different.

What are the reasons for this?

There can be many reasons. The size of the family alone plays an important role here. Or the increasing distance from the founders of the family fortune – often entrepreneurs. Sometimes the founding generation wants to successively hand over responsibility to the children, sometimes it is already a matter of transition from the third to the fourth generation or even further. As a rule of thumb, the further away we are on the timeline from the founder, the less the company is in the foreground these days.

In these cases, there are certainly more family members as well….
Indeed. It used to be clear that one of the children would later run the company. In some cases, it was just a question of who it would be. Today, it’s no longer so clear. Some of the next generation has completely different ideas and goals and perhaps would rather realize their own potential.

What else has changed?

The spatial situation is often different. In the past, large parts of the family lived near the company headquarters. Today, it’s always across national borders, which can make it more difficult to convey a family mindset that’s about shared values. Days like this are good for that, too.

How often do family days take place?

That depends on the goals we want to achieve together with our clients. Depending on the situation, we recommend one to four Family Days per year. As a rule, families meet twice a year.

Which type of family day is the most fun?

(laughs) So far, all of them have been fun. Two types of family days are certainly particularly exciting. One is when the younger generation has not yet been informed about fundamental issues, or only a little. For example, about how large the assets are. In these cases, we take over the communication and training, often together with the parents and, depending on the focus of the topic, also with other trusted third parties such as the tax advisor. This makes it easier for everyone to get involved in the topic.

And secondly?

Family days that take place without the parents. The children are then allowed to ask any questions that they might not dare to ask in the presence of their parents. For example, because they don’t want to admit that they are not very familiar with a topic.

But then these two types of family days are not the rule?

No, although the differences here are really quite large. It starts with how formal – or informal – the day should be. We often go out for dinner with the family the night before. On the following day, we can discuss questions about assets or what the family structure looks like or should look like.

The range of questions about assets alone is likely to be wide …
Indeed. It can range from the basics, such as what stocks and bonds are, to complex topics. For example, what constitutes a strategic asset allocation and what was worked out with the family in a specific case. Or training the family members on illiquid asset classes such as real estate, private equity or private debt.

How long does such a family day last?

There are big differences there, too. Most recently, for example, it was five hours. It is very important not to overwhelm the audience. Details can then be explained in follow-up meetings. The fact that bond prices fall when interest rates rise is always a pitfall. But questions about voting rights in a family business can also be difficult. And what happens in the event of an inheritance? What about the saleability of shares?

How often does the issue of sustainability play a role?

This question is being asked more and more frequently, especially by the younger generations. Whereby there are also two different topics here. They were probably thinking about sustainability in terms of investing money. But at least as often it is a question of developing a sustainability strategy – for the family or the company. The first step is always to discuss within the family what sustainability actually means to them.

There could be different opinions on this …
You are right. The topic is usually put on the agenda by the younger generation. As a rule, however, the family members agree on a basic understanding quite quickly.

How does a family day end?

(laughs) Usually in a good mood. But I’m sure you meant something else. The important thing is that it ends with the family having developed a common understanding of individual topics or, to put it another way, that a result or at least partial result has been achieved. With so many topics discussed, it is also important that certain formalities are observed. This is helped by a protocol, which is written and sent out again to the round and must be approved by all.

A protocol? So far it has sounded quite relaxed …

It often is. However, family days are far from sitting down and being sprinkled around a bit. These days are a lot of work, for everyone involved. It starts with sending out invitations in time. It’s about preparing content. It’s about giving decision templates to the round. It often makes sense for the younger generation to take over part of the organization: Whether this is of a technical or more organizational nature is not decisive. Here, too, we as a family office provide support.

Are family days on the increase?

Definitely. Before the first family day, there are still considerable reservations in some cases: a family work meeting? Is that really necessary? But in the end, everyone is glad that the Family Day took place – and is already looking forward to the next one.


Mutual Trust: The Family Strategy – your plan to achieve what matters most

Wealthy families have a significant positive socio-economic impact on Australia, as detailed in Mutual Trust and the University of Adelaide Business Schools’ recent publication Why the Modern Family Office Matters. This positive impact can be accelerated when families have a clear purpose for their wealth and the right Family Strategy in place to deliver upon it.

Click below to download Mutual Trust’s article in full on the topic of ‘The Family Strategy – your plan to achieve what matters most’. 


Mutual Trust: Why families of wealth are investing in Family Learning

Mutual Trust’s recent publication ‘Why the Modern Family Office Matters’ identifies the importance of Family Learning in empowering families to achieve what matters most.

A considered program of learning, engagement and fulfilment strategies tailored to address individual and collective family needs will equip families with the skills they require to manage wealth, foster healthy dynamics and achieve ongoing success and family unity across generations.

Click below to download this article in full, where the team at Mutual Trust share best practices and talk about why family learning is so important.

 


Turim's Semi-Annual Letter: Artificial Intelligence & Institutional Investors

The importance of artificial intelligence and how to invest in the thesis through public and private markets

This year, we witnessed a historic milestone with the launch of ChatGPT by OpenAI, introducing artificial intelligence to the public. Achieving a remarkable milestone of 100 million users in just 2 months, ChatGPT broke records and revolutionized the technology universe.

At the heart of this revolution is the Large Language Model (LLM), an advanced form of AI capable of understanding complex questions and generating sophisticated answers. Imagine having a virtual assistant that simplifies everything from daily tasks to complex challenges at work.

In our Turim Letter #40, Turim sheds light on the relevance of artificial intelligence and how it is transforming our reality. Furthermore, we explore investment opportunities in this innovative scenario through both public and private markets.

The real applicability of LLM becomes evident in the corporate world, highlighting how companies adopting this technology can boost efficiency, productivity, and innovation across various sectors.

In the investment landscape, some companies are drawing attention, promising potential IPOs and demonstrating continuous growth in the AI sector. In 2023, the market has already allocated over USD 40 billion to companies directly linked to AI, shaping sectors such as health and biotechnology.

Entering the AI value chain, from software development to semiconductors, significant changes in the value generation of public companies are already observable, as seen in the cases of Amazon, Google, and Microsoft.

The benefits that artificial intelligence will bring to our daily lives are still challenging to quantify, but with the emerging technologies, we are beginning to grasp the magnitude of the revolution that lies ahead.

Who are the institutional investors?

In the financial world, institutional investors such as pension funds, endowments, foundations, and sovereign wealth funds play key roles. They manage substantial amounts of capital and have the ability to exert significant influence on asset prices and market trends.

In our second theme of the Turim Letter #40, Turim explores in detail the relationships between institutional investment management and family wealth management.

Institutional investors operate under rigorous structures and prioritize the preservation and growth of capital, aligning with the interests of beneficiaries or philanthropic and socioeconomic goals. While social foundations and endowments are dedicated to philanthropic and social causes, pension funds, also known as EFPCs, aim to secure the long-term financial well-being of workers by providing additional income in retirement. Sovereign wealth funds, on the other hand, manage state reserves to achieve long-term financial returns and protect national wealth.

Based on our experience in wealth management, we highlight notable similarities between the investment management of these entities and family wealth management. For example, both seek long-term returns, asset diversification, require detailed risk analysis, transparency, and trusted relationships. Additionally, adaptation to different market conditions, understanding regulatory changes, investment trends, and the ability to offer customized solutions are crucial for successful management.


Pitcairn: Selecting the Right Trustee - Your first instinct may not be the best choice

One of the most important choices you’ll make when you establish a trust is selecting the right trustee. The trustee oversees the trust assets, which are typically worth millions. The decisions your trustee makes, along with the trust documents you sign, will largely determine how well your trust fulfills its purpose.

Parents might be inclined to name their adult child as trustee, but question whether it’s the right call. Are they mature enough to handle fiduciary responsibilities?

There isn’t a one-size-fits-all answer to the question of whom to choose, and that’s why it can be such a difficult decision. Here are seven traits to look for in a prospective trustee.

1. A Sophisticated, Modern Mindset
2. An Understanding of a Trustee’s Duties
3. A Well-Suited Approach to the Family’s Needs
4. A Focus on Managing the Process
5. A Commitment to the Next Generation
6. A Big-Picture Perspective on the Trust’s Purpose 7. The Right Relationship with the Family

Let’s discuss each trait in more detail.

1. A Sophisticated, Modern Mindset

Serving as a trustee is about so much more than administering the trust, making distributions, and managing investments. To be truly

effective, a trustee must be aware of the political climate as it relates to changing trust taxation laws that could affect the beneficiaries.

The trustee should also understand the complexities of trust situs. The laws of the state where a trust is set up affect how well the trust protects assets from creditors and how trust distributions are taxed. For example, the trustee needs to understand the possible implications of your beneficiary daughter moving to a state that has higher income taxes than the state from which she is moving to and, ideally, discuss those issues with her beforehand.

2. An Understanding of a Trustee’s Duties

The trustee you select must act as a fiduciary and fulfill these three key duties:

  • Loyalty: Act in the best interests of the trust and its beneficiaries.
  • Impartiality: Not make decisions that favor the interests of one beneficiary over another.
  • Prudence: Exercise care, diligence, and caution in administering the trust.

Understanding these duties can help you shorten your list of trustee candidates. Certain family members might not be detail oriented enough to fulfill the duty of prudence. A business associate may struggle to be impartial if the business’s best interests conflict with those of the trust.

3. An Approach Well Suited to the Family’s Needs

As the grantor, you know the first generation of your trust’s beneficiaries, and maybe the second generation. You are likely familiar with their strengths and weaknesses when it comes to life choices and financial decisions.

To view all seven traits to look for in a prospective trustee, click below to view the PDF document in full.


Pitcairn: You've been asked to be a Trustee. Now what?

Being asked to oversee a family trust is a big deal. Is it an honor? An obligation? A little of both? It’s a huge responsibility, and one you may not feel totally prepared to accept.

Even if you’ve participated in or been exposed to the world of trusts, you may not have the knowledge or skills to be an effective trustee right now. And if you haven’t been included in your family’s in-depth financial discussions before, you might feel completely overwhelmed. Someone obviously thought you were capable, though, or they wouldn’t have selected you as a trustee.

The first step in deciding whether to accept this role is to learn more about what it means to be a trustee, especially in your family.

Understanding Purpose and Mission

Before you agree to become a trustee, it is helpful to understand the original intent and purpose of the trust. Why was the trust created? Who does it benefit? Oftentimes, trusts can accomplish both personal and family goals. Families may establish trusts to manage family business assets or other financial assets, allow for flexibility or future control, tax efficiency, wealth transfer planning, and many other considerations.

Now that you have a better understanding of the trust’s intent, let’s explore trustee responsibilities and obligations.

Fiduciary Responsibilities You’ll Take On

Perhaps the most important aspect of being a trustee is understanding that a trustee must serve as a fiduciary. As a fiduciary, trustees have a loyalty to the grantor and beneficiaries, and they must always act in the best interests of the trust’s beneficiaries above all else. (More on this later on.)

Since some family trusts are designed to serve multiple generations, you’ll need to consider how your decisions will affect not just current but also future beneficiaries, who might not even be alive yet, but their interests are just as important.

Administrative Duties You’ll Manage

Numerous administrative duties go along with overseeing a trust. The trust must file tax returns and provide regular statements to beneficiaries, for example. To fulfill those duties, the trust needs to have thorough and accurate bookkeeping.

Also, depending on the trust, you may have to issue notices, make regular distributions on certain dates, and keep track of age attainments that determine when current or future beneficiaries get certain rights.

Modern trusts sometimes have multiple roles besides trustee, such as a distribution advisor, trust protector, investment manager, and tax advisor. A trustee may have to coordinate with each of these parties.

Failing to meet these administrative obligations or doing them late, can have adverse consequences.

Crucial Decisions You’ll Have to Make

A trustee may need to make numerous decisions that cover a wide range of scenarios. Here are some examples of the type of decisions a trustee may have to deal with.


Pitcairn: Selecting the Modern Trustee

The role of trustee has evolved significantly in the 21st century, and today’s trustees need to recognize that a trust is rooted in a human relationship, not just a legal one. With that perspective, the right trustees are best positioned to govern and conduct the trust as it’s typically intended—as a gift of love.

Choosing a trustee is easier said than done. Naming a close sibling who is not fully aware of their responsibilities can leave that person feeling ill-equipped for the significant decisions required along the way, while selecting a business associate may unintentionally result in that person struggling to be as impartial as they should be.

Click below to download and read about the 7 traits to look for when selecting a trustee. 


Pitcairn: Preparing the Next Generation for Family Philanthropy

Engaging the rising generation is one of the most important aspects of successful family philanthropy. Why wait until younger family members are in their 20s, 30s, or even 40s to show them how your family gives? Involving children, teens, and young adults in age- appropriate ways can make stewardship a natural part of life, teach important skills, and foster intergenerational bonds.

These best practices for next-gen philanthropy can help you build a stronger base to support your family’s giving legacy far into the future.

Educate the Youngest Generation

Even before they can correctly pronounce “phil-an-thro-py,” children can participate in your family’s endeavors. It starts with education.

Let’s say your family gives to the zoo. During a family meeting, an adult might spend some time with the youngest generation talking to them about how much it costs to feed and care for their favorite animals and explaining how your family helps meet those needs.

Another option is to ask children what problems they’ve observed in their community. Let them brainstorm ways to help, then talk about how your family could contribute to a solution.

Encouraging your children to notice others’ needs and assess how to meet them will make philanthropy second nature.

Respect Personal Passions

To keep children, adolescents, and young adults engaged, carve out space for them to pursue their own philanthropic passions.

Your family giving enterprise will be more likely to succeed if the next generation enjoys participating and feels they are individually making a difference — not just following a previous generation’s mandate.

Let’s say your family supports a local children’s hospital. Your teenager is more likely to be interested if they learn about the different types of patients the hospital serves, finds a way to identify with them, and comes up with their own ideas for how to help. If your son is an artist, maybe he can lead a painting workshop. If your daughter is interested in medicine, talk about how she can explore that interest while working with your family to further the hospital’s mission.

Establish Flexible Structures

One of the best ways to encourage next-gen participation in family philanthropy is through a flexible giving structure. Whether your family has a charitable trust, donor-advised fund, or private foundation, allocating funds to different causes and allowing family members to direct contributions can help everyone find a personally meaningful way to contribute.

For example, a family might collectively decide how to allocate the majority of that year’s total giving but also carve out a certain percentage to be directed by individual family members — without having to ask permission or seek approval.

Encourage Positive Communication

Even if families have total freedom to direct a portion of their family’s giving, they can remain accountable for their choices and learn about each other’s interests. For example, if a family lets their eldest daughter decide where a portion of its giving goes, she could be encouraged to make a presentation to the family on why she chose to support that cause, how the family might contribute its time, talent and treasure, and anticipated outcomes.

To view the entire PDF, including other best practices, click below to download.